ARCHIVED - Broadcasting Commission Letter adressed to Suzanne Wheeler (Rogers Media Inc.) and Nathalie MacDonald (Bragg Communications Inc.)

Ottawa, 7 November 2019

Our reference: 2019-1044-8

By email

Susan Wheeler
Vice-President, Regulatory, Media
Rogers Media Inc.
Susan.Wheeler@rci.rogers.com 

Natalie MacDonald
Vice President – Regulatory
Bragg Communications Inc.
Natalie.MacDonald@corp.eastlink.ca

Re: Request for final offer arbitration (2019-1044-8) with respect to Sportsnet, Sportsnet One, and Sportsnet 360

Dear Ms. Wheeler and Ms. MacDonald:

Pursuant to sections 12 to 15 of the Broadcasting Distribution Regulations, sections 14 and 15 of the Discretionary Services Regulations,and Broadcasting and Telecom Information Bulletin CRTC 2019-184 (Information Bulletin 2019-184), this letter is to advise the parties that the Commission accepts the request by Rogers Media Inc. (Rogers) for final offer arbitration (FOA) with Bragg Communications Inc. (Eastlink) for the Sportsnet and Sportsnet One services. The Commission denies the request for FOA with respect to Sportsnet 360.

This letter sets out the matter upon which the Commission will make a determination, the dates upon which the FOA process is to be conducted, and the procedure to be followed.

The Commission strives to release FOA decisions as expeditiously as possible. However, any procedural issues that arise may result in delays to the applicable timelines (see details in the attached Procedural Appendix).

The application

On 7 October 2019, the Commission received a request for FOA from Rogers, pursuant to section 12 to 15 of the Broadcasting Distribution Regulations (BDU Regulations) and section 16 of the Exemption Order for terrestrial broadcasting distribution undertakings serving fewer than 20,000 subscribers, relating to a commercial dispute with Eastlink regarding distribution of Sportsnet, Sportsnet One and Sportsnet 360. Rogers argued that the dispute meets all of the criteria for FOA set out in Information Bulletin 2019-184.

Rogers proposed that the scope of the FOA proceeding be limited to:

• establishing the linear wholesale rate for each of the three Sportsnet Services when distributed on Eastlink’s licensed and exempt BDUs; and,
• adopting a penetration-based rate card (PBRC) for each Sportsnet Service that would have 5% penetration bands and would begin by establishing a wholesale rate at 100% penetration.

On 11 October, Eastlink responded, stating that it generally agreed with Rogers’ proposed scope for the FOA, but requested that a discount for bulk subscribers and multiplatform rights be included, and that the penetrations-based rate card (PBRC) bands be undefined.

In its 17 October response, Rogers stated its view that the FOA scope should be narrow, consistent with the Commission’s past practice, and thus should exclude multiplatform rights, bulk discounts and other matters that do not involve the linear wholesale rate payable for the distribution of a programming service. Further, Rogers also clarified that three of the four multiplatform rights defined by Eastlink would be included in the linear rate, and thus be part of the FOA’s scope. Rogers also put forth arguments supporting its proposed rate card structure.

In its 18 October submission, Eastlink withdrew its request to include multiplatform rights in the scope in response to Rogers’ clarifications. Eastlink reiterated that the inclusion of bulk discounts is not complicated; that it is an exclusively monetary issue; and is inextricably linked to wholesale rates. Eastlink also restated its view that setting specific penetrations bands would be prejudicial to Eastlink, and requested that the bands be unspecified.

Following requests from staff to provide additional information, on 25 October, Rogers stated that it does not oppose limiting the FOA to fewer than three services while Eastlink strongly opposed the omission of any of the services from the FOA. Further, should a service be excluded, both parties recommended that Sportsnet 360 be excluded. The parties also put forth arguments on how penetration should be calculated.

Commission Decisions

Upon review of the current record, the Commission considers that FOA is an appropriate method of dispute resolution in this case, as the dispute is exclusively monetary, involves only two parties, and otherwise meets the criteria for dispute resolution set out in paragraph 4 of Information Bulletin 2019-184. Accordingly, the Commission accepts, in part, Roger’s FOA application.

In accordance with paragraph 22 of Information Bulletin 2019-184, the matters upon which the Commission will make a determination are as follows:

1. Establishing the linear wholesale rates for distribution of Sportsnet by Eastlink.
2. Establishing the linear wholesale rates for distribution of Sportsnet One by Eastlink.

The Commission hereby notifies the parties that other matters relating to the distribution of Sportsnet and Sportsnet One by Eastlink will not be considered in this proceeding and are left to negotiation between the parties, including with the assistance of Commission staff, if necessary.

Consistent with paragraph 22 of Information Bulletin 2019-184, and past Commission practice, the Commission finds that including a third service and bulk discounts as part of the scope of the FOA would unnecessarily complicate the proceeding. As such, the Commission denies Roger’s request for FOA on Sportsnet 360, and determines that bulk discounts will be excluded as part of the scope of the proceeding.

With regards to defining the penetration bands to be used in preparing the final offers, while identical rate cards would simplify the comparison and evaluation of the offers, the Commission is of the view that allowing the parties to choose the bands to be used in their proposals gives them more flexibility in formulating their offers, and that each party is capable of justifying its proposals. Therefore, the Commission determines that each party may choose the penetration bands to be used in its final offers.

Concerning the basis on which penetration will be calculated, the Commission is of the view that calculating penetration using total subscribers (the aggregate basis), rather than calculating the penetration on each system, would simplify the analysis and comparison of the offers. In addition, the Commission notes that the aggregate basis is the approach that is most commonly used in the industry. Accordingly, the Commission determines that the data and the final offers are to be submitted on an aggregate basis. The Commission notes that its decision is based on other considerations as well, but that this information was submitted in confidence.

In the final offers they will submit, the parties must propose offers consistent with the Commission’s above noted characterization of the matter at dispute. A confidential template to this effect has been provided to the parties. The Commission will examine the final offers submitted by the parties and will select one in its entirety for each of Sportsnet and Sportsnet One ^Footnote1 . The Commission’s decision will be binding on the parties.

Documents to be provided

The Commission requires that the parties each file their final offers with the Commission by 22 November. A confidential template in Excel format has been provided to facilitate the parties’ submissions. Please refer to the attached Procedural Appendix for the procedure to be followed in the filing of documents, in addition to Information Bulletin 2019-184.

When preparing your arguments, please refer, where applicable, to the criteria for fair market value set out in the Wholesale Code, Broadcasting Regulatory Policy CRTC 2015-438. As noted in the Interpretation of the Wholesale Code, Broadcasting Information Bulletin CRTC 2015-440, the Commission will determine which fair market value factors are applicable in a given case and assess proposed rates or final offers in relation to those factors. In addition, the Commission will apply, where appropriate, a public interest test that examines whether the proposed wholesale rates are consistent with the relevant public policy objectives.

To complete the record, Eastlink must also provide additional information as set out below by 22 November. A confidential template in Excel format has been provided to facilitate the transmission of that information when applicable:

1. the latest affiliation agreement between Eastlink and Rogers for the distribution of Sportsnet and Sportsnet One and any applicable amendment (or whatever term sheet that may apply);
2. the wholesale rates paid by Eastlink for Sportsnet and Sportsnet One when offered in preassembled and/or build-your-own package (as the case may be);
3. the wholesale rates paid by Eastlink for other comparable services (Canadian and foreign) in preassembled and/or build-your-own package (as the case may be), as well as the corresponding affiliation agreements and any applicable amendments (or whatever term sheets that may apply);
4. the average monthly number of subscribers to Sportsnet and Sportsnet One, in preassembled and/or build-your-own package (as the case may be);
5. the average monthly number of subscribers to each comparable service (Canadian and foreign) distributed by Eastlink;
6. the retail rate for packages offered by Eastlink that include Sportsnet and/or Sportsnet One;
7. Eastlink’s subscribers’ viewership to Sportsnet and Sportsnet One (e.g., set top box data, average minute audience, total number of hours watched); and
8. Eastlink’s subscribers’ viewership to all other comparable services offered by Eastlink (e.g., set top box data, average minute audience, total number of hours watched), if available.

To complete the record, Rogers must also provide additional information as set out below by 22 November. A confidential template in Excel format has been provided to facilitate the transmission of that information when applicable:

1. Affiliation agreements in effect between Rogers and other BDUs in the Canadian market for the distribution of Sportsnet and Sportsnet One;
2. For each BDU (other than Eastlink) that distributes Sportsnet and/or Sportsnet One:
   1. wholesale rates broken down by distribution in a preassembled and/or build-your-own package (as the case may be),
   2. number of subscribers and actual penetration levels, and
   3. applicable volume discount;
3. Data on the tuning or viewership to Sportsnet and Sportsnet One, including
   1. average minute audience (AMA), and
   2. total number of hours watched, by month;
4. Total payments received by Rogers from each BDU (including Eastlink) that distributes Sportsnet and Sportsnet One.

By 27 November, once Commission staff has confirmed that the offers respond to the identified scope of the proceeding, Commission staff will forward to each party a copy of the other party’s offer.

The parties will have five days following receipt of the other party’s offerto file comments on the other party’s final offer with the Commission, and to serve a copy of those comments on the other party.  However, neither party will be authorized to amend its offer.

Any documents filed with the Commission should be filed via the secure service “My CRTC Account” (GCKey or Partner Log In) using the “Broadcasting Online Form and Cover Page” on that same webpage and quoting the application number noted above.

A copy of this letter will be added to the public record.

Responsibilities of the parties

The parties may contact Rémi Savard at 819-997-4439 or at Remi.Savard@crtc.gc.ca if they require additional information regarding the organization and conduct of the final offer proceeding.

Where a document is to be filed or served by a specific date, the document must be actually received, not merely sent, by that date. In addition to filing with the Commission via “My CRTC Account”, the parties must send copies of all the documents in question to Differends-disputes@crtc.gc.ca, and copy Rémi Savard.

Yours sincerely,

Claude Doucet
Secretary General

Procedural Appendix

Information Bulletin 2019-184 sets out the practices and procedures to be followed in FOA (par. 17-33), as well as matters relating to the filing of documents and confidentiality (par. 58-64). Parties should be aware that any deviation from the final offer arbitration process may result in delays to the applicable timelines.

Filing of documents

Parties must follow the following naming convention in filing documents via GC key:

• Application number – FOA – Filing party – Document name – Document version – Filing date (yyyy-mm-dd)

In the confidential CRTC version, parties are to highlight text that is designated confidential towards the other party in green, and confidential towards the public in yellow.

Confidentiality

In accordance with paragraph 59 of Information Bulletin CRTC 2019-184, existing Commission confidentiality rules and practices will apply throughout the FOA proceedings.  The applicable rules and practices are set out in the Canadian Radio-television and Telecommunications Commission Rules of Practice and Procedure (the Rules) and described in Broadcasting and Telecom Information Bulletin 2010-961.

Section 31(1) of the Rules provides that in broadcasting matters, a party may designate information related to the following as confidential:

1. information that is a trade secret;
2. financial, commercial, scientific or technical information that is confidential and that is treated consistently in a confidential manner by the person who submitted it; or
3. information the disclosure of which could reasonably be expected
   1. to result in material financial loss or gain to any person;
   2. to prejudice the competitive position of any person; or
   3. to affect contractual or other negotiations of any person.

Section 31(2) of the Rules provides that the party must make the designation at the time that they file the document that contains the information. Moreover, the party that designates information as confidential must provide reasons, as well as any supporting documents, why the disclosure of the information would not be in the public interest, including why the specific direct harm that would be likely to result from the disclosure would outweigh the public interest.

[These sections are only an excerpt of the applicable Rules.]

Date modified:

2019-11-07